There appears to be a Bitcoin rally, and experts predict that it could rise by up to 20% to around $35,000 to $36,000. Citing a report by Matrixport, the cryptocurrency has been trading in a narrowing wedge, which is likely to break to the upside. While Bitcoin’s trading volumes have declined recently, there are still new all-time highs in the number of active addresses on the Bitcoin network.
Several factors are driving the current Bitcoin rally, including instability in the financial system, falling inflation, and regulatory issues surrounding stablecoins. As investors shift from higher beta cryptocurrencies and stablecoins, Bitcoin has emerged as the go-to digital asset.
Flights to Quality
The same source states that investors are looking for safe havens amid instability in the financial system. The Federal Reserve’s interest-rate policy has severely impacted some investment portfolios and threatened the financial stability of the economy. This has led to several flights to quality, with traders and investors moving their funds from higher beta cryptocurrencies and stablecoins into Bitcoin.
Regulatory Issues
Regulatory issues surrounding stablecoins have also led investors to turn to Bitcoin. When Paxos Trust’s Binance USD (BUSD) faced regulatory scrutiny, investors moved their funds from BUSD to BTC. Similarly, when Circle Internet Financial’s USD Coin (USDC) lost its peg, investors shifted their money from USDC to Bitcoin. Stablecoins are a type of cryptocurrency whose value is pegged to another asset, usually the US dollar.
Classification of Digital Assets
Several cryptocurrencies are facing the possibility of being labeled as securities, which has created uncertainty in the market. However, it is important to note that regulators and central banks have already classified Bitcoin as a commodity rather than a security based on the landmark Howey Test, which effectively exempts it from scrutiny. Although there is a transparent framework for regulation, the report suggests that some cryptocurrencies may be able to evade it.
Interest-Rate Hikes
The recent hike of 25 basis points in interest rates by the Federal Reserve is likely to be the last one for this cycle as per Matrixport’s prediction. This projection can potentially pave the way for a powerful market rally. Additionally, the resumption of stock buybacks after the recent earning season has ended is expected to provide favorable conditions for stocks and other risk assets to flourish, according to Markus Thielen, the head of research in the company.
Technical Analysis
According to Matrixport’s research report, Bitcoin’s narrowing wedge could signal an incoming upward movement by up to 20%. The report states that technically, the wedge’s breakout to the upside could project a move higher by an amount equal to when the wedge started to be formed.
Final Thoughts on the Present Bitcoin Rally
Several factors have contributed to the current Bitcoin rally. The financial system’s instability, regulatory concerns surrounding stablecoins, and a decrease in inflation are some of the significant drivers. As investors move away from higher-risk cryptocurrencies and stablecoins, Bitcoin has become the preferred digital asset. The market is poised for another robust rally as interest-rate hikes are expected to level off and stock buybacks resume. Despite a recent drop in Bitcoin’s trading volumes, there is little resistance to its upward trajectory.
Giancarlo is an economist by profession with a career spanning nearly two decades. His professional journey has seen him assume vital roles in various government and private organizations such as the Department of the Interior and Local Government (DILG), the National Economic and Development Authority (NEDA), Megaworld Corporation, and the China Banking Corporation in the Republic of the Philippines.
In addition to his civic and corporate pursuits, his forward-thinking approach has led him to manage several prominent websites in the banking and finance sector, notably the Australia-based RateChoice, where he immersed himself in the world of emerging financial technologies and where he found particular interest in Bitcoin all the way back to 2013.
Prior to his addition to Blockzeit’s dynamic team, he held an essential role as Project Manager for initiatives encompassing blockchain, stablecoin, mining, special economic zone development, and iGaming. This noteworthy chapter in his career unfolded under the auspices of InPlan Consultancy Services, Inc., the think-tank of IMPERO Consortium Management Corporation headquartered in Manila, Philippines, and Tokyo, Japan. InPlan, led by a distinguished retired Cabinet member of the Philippines, collaborates directly with IMPERO’s core management team, contributing to strategic planning and business development endeavors.
